Tullow Oil shares are tumbling after the energy group cut free cash flow expectations

Tullow Oil shares Thursday morning after the energy company cut its free cash flow forecast.

The West Africa-focused energy producer now expects to post between $150 million and $200 million in free cash flow this year, compared to previous expectations of $200 million to $300 million due to payment delays.

It now expects payments from the anniversary field to be made in January 2025, while the Ghanaian government currently owes the company about $40 million in overdue gas payments.

Shares in the London-based company fell 9.4 percent to 20.7p just after 11am. FTSE All-Share Index‘s second biggest decliner behind Ithaca Energy.

Tullow further revealed that oil production at Ghana’s Jubilee field averaged about 89,000 barrels of oil equivalent per day (boepd) until the end of October, which was lower than forecast.

According to the report, this was caused by the underperformance of a well, power outages that reached water injection levels, and “unplanned downtime” at an onshore gas processing plant.

By comparison, oil production exceeded expectations at the TEN development, totaling approximately 19,000 boepd.

Additionally, the group said idle production would average about 10,500 barrels per day in 2024, which is in line with forecasts.

Rahul Dhir, CEO of Tullow, said: “Our cash-generating activities allow us to continue our progress in deleveraging.

‘This has been achieved despite the underperformance on the Anniversary Field, which has been partly offset by a strong performance at TEN.’

He added: ‘We are well positioned to optimize our capital structure and look forward to progressing plans to retire our remaining debt.’

Tullow expects net debt to be around $1.4 billion by the end of 2024, meaning it will have been halved over the past five years.

The company has achieved this in part by cutting capital expenditure, selling assets in Gabon and Equatorial Guinea and divesting a stake in some Ugandan onshore oil fields.

The country’s finances have also benefited from a rise in oil prices due to the easing of pandemic-related travel restrictions, OPEC+ countries limiting manufacturing output and Russia’s large-scale invasion of Ukraine.

Under the current strategy, the group aims to have net debt of less than $1 billion by 2025 and cash gearing of less than 1x in the near term.